TCP Capital Corp.

Ticker: TCPC, Buy below $16.

TCP Capital Corp is a Small-Cap Business Development Company that is focused on middle market lending.

Why I Would Buy

  1. Dividend – Yields over 9%. This dividend is well covered by Net Investment Income (110% dividend coverage in 2017).
  2. Insider Trends – Officers has been aggressive buyers for last 12 months, especially so within the last 3 months.
  3. Credit Ratings – TCP Capital’s debt is rated investment grade, a testament to the company’s strong balance sheet.
  4. Cheap – TCPC currently trades below its book value.
  5. Fee Structure – TCPC has one of best advisory fee structures in the BDC industry, its base and incentive fee compensations are shareholder friendly.

What Could Go Wrong

  1. High Beta – BDCs like TPC that serve the middle markets are strongly correlated to the domestic US economy, and will suffer disproportionately in an economic downturn.

 

Disclosure: I am long TCPC, please read additional disclosures here before taking any action based on this post.

Hersha Hospitality Trust

Ticker: HT, Buy below $18.

Hersha Hospitality Trust is a small cap REIT focused on hospitality industry.

Why I Would Buy

  1. Cheap– Trailing P/AFFO: < 9x.
  2. Insider Trends – Management has been aggressive buyers for last 12 years, especially so in the last 3 months.
  3. Dividend – Currently yields over 6%. This is well covered by Adjusted Free Flow from Operations (AFFO), the payout is less than 55%!!
  4. Buyback – A recently announced buyback would retire 13% of outstanding shares.
  5. Below Book –Hersha trades below 80% of book value.

What Could Go Wrong

  1. High Beta – The Hotels industry is strongly correlated to the overall economy, and would suffer disproportionately in a downturn.
  2. Industry Trends – Home rental services are potentially disruptive trends for the hospitality industry, the full extent of impact is indeterminate.

Disclosure: I am long HT, please read additional disclosures here before taking any action based on this post.

The Interpublic Group

Ticker: IPG, Buy below $24.

Why I Would Buy

  1. Cheap– Interpublic trades at less than 14 times forward earnings and 1.1 revenues.
  2. RoE – Return-on-Equity is my favorite metric, IPG has maintained double digit returns on equity for the past decade.
  3. Dividend – Currently yields over 3%.
  4. Contrarianism – IPG is near a 52 week low.

What Could Go Wrong

  1. High Beta – Advertising and media spend are strongly correlated to global economy, and is first spending to be cut in a downturn.
  2. High Payout – Payout ratio has been steadily climbing, and is nearing 50% of earnings.

Disclosure: I am long IPG, please read additional disclosures here before taking any action based on this post.

Franklin Street Properties

Ticker: FSP, Buy below $12.

Why I Would Buy

  1. Cheap– Franklin Street Properties is trading at just 11 times forward FFO (free flow from operations).
  2. Dividend – FSP yields over 7%, while the FFO payout ratio hovers around a healthy 75%.
  3. Credit Rating – FSP enjoys investment grade ratings.
  4. Insider Buying – Managers and directors at Franklin Street purchased 150,000+ shares during the past 12 months, of which 131,275 were purchased during the past 3 months. No shares were sold by insiders during this period.

What Could Go Wrong

  1. Hurricanes Harvey and Irma – Houston is one of the key markets for Franklin Street, and they own properties in Miami and Atlanta too. Therefore, the impact of Harvey and Irma on FSP’s cash flow is indeterminate at this point.

Disclosure: I am long FSP, please read additional disclosures here before taking any action based on this post.

China Mobile

Ticker: CHL, Buy below $55.

Why I Would Buy

  1. Cheap– Just 12 times forward earnings.
  2. High RoE – Return-on-Equity is my favorite metric for evaluating stocks, CHL has maintained RoE in the teens during the past decade.
  3. Dividend – CHL yields over 3%, while the payout ratio hovers around a healthy 40%.
  4. Credit Rating – Very strong credit ratings: S&P A+, Moody’s A1.
  5. Wide Moat – Largest cell phone, internet and telecommunications provider in China. CHL is the dominant player amongst an oligopoly of 3 participants.

What Could Go Wrong

  1. State Intervention – 70% of China Mobile’s shares are owned by the government, and it exercises considerable control over the company’s operations.  Being state controlled, the company’s profit motive can sometimes be subordinated by state’s social goals.

Disclosure: I am long CHL, please read additional disclosures here before taking any action based on this post.